Not even a day after small business advocates disclosed that the carbon tax rebate for small businesses would be taxed, the Liberals backtracked on their position and removed the tax.
The Canadian Federation of Independent Business revealed Tuesday that the Liberals would tax a long-delayed $2.5 billion carbon tax rebate designated for small businesses.
The Liberals previously announced that the rebates would be delivered in Dec. 2024.
“This is deeply offensive to small firms and, frankly, a ridiculous idea,” said CFIB President Dan Kelly in the organization’s press release. “Government is now planning to tax a tax rebate – it would be like charging income taxes on someone’s tax refund. Taxing the carbon tax rebate also throws out of the window any pretense that the carbon tax is revenue neutral to government as it will be collecting hundreds of millions in corporate income tax revenue on the rebate.”
Kelly further attacked the Liberals in a post to X, saying that in his 30 years of working in public policy, he had seldom seen a tax or fiscal policy “bungled” as badly as the federal carbon tax.
He revealed that following the announcement of a 10% carbon tax revenue rebate to small businesses in 2019, the Liberals sat on the money for five years while it grew to $2.5 billion. Kelly previously said that small businesses pay about 40% of the carbon tax.
The feds finally agreed to return the $2.5 billion to 600,000 small businesses following public backlash.
Kelly said the Liberals announced the rebate would be cut from 9% to 5%.
Before learning of the additional tax, the CFIB celebrated the Liberals announcing that they would finally issue the rebate.
The CFIB said that the CRA told them in writing that the rebate would be tax-free because it was modelled after the Canada Carbon Rebate, which is exempt from personal taxes.
“This made sense to us. But after we asked the Department of Finance for final confirmation of this information, they told us the small business rebate would be taxable as it is considered government assistance,” said Kelly. “Rebating a small portion of the carbon taxes paid by small business is about as far from government assistance as I can imagine.”
The CFIB said that, worse still, the carbon tax will further increase on Apr. 1, 2025.
Just over 12 hours after Kelly’s post to X, Finance Minister Chrystia Freeland said that the rebate would be tax-free.
Kelly thanked Freeland right away.
“This is good news. I appreciated the call just now from Deputy Prime Minister @cafreeland with the assurance that the long-awaited Canada Carbon Rebate for Small Business will be tax-free,” he said.
The Canadian Federation of Independent Business previously issued a press release highlighting how much small businesses were owed in each province. The one-time rebates would result in businesses being paid between $2,600 and $7,000 in Ontario, Manitoba, Saskatchewan, and Alberta, according to the CFIB.
Of the eight provinces under the federal carbon backstop, Alberta was owed the second most. 175,383 businesses are owed $718.2 million in Alberta, amounting to a rebate of $4,095 per business. This trails only Ontario, where 506,632 businesses are owed $1.336 billion, resulting in a rebate of $2,637 per business.
Saskatchewan businesses would receive the highest individual rebate. 43,007 businesses are owed $300.6 million in the province, resulting in a rebate of $6,990 per business.
“It’s not surprising why 83% of small business owners now oppose the carbon tax. Delaying, then taxing, then slashing promised rebates to small businesses are yet additional reasons why the carbon tax needs to be scrapped entirely,” said Kelly. The Parliamentary Budget Officer estimated that the GST on the carbon tax would cost taxpayers $400 million alone in 2024.
